Tate & Lyle plunges on new profits alert

More than £745million was wiped off the value of Tate & Lyle yesterday after a shock pro­fits warning blamed on rising cer­eal costs and a row between Europe and the US over genetically modified crops.

Shares in the sugar and sweeteners maker fell nearly one-third to close 155p down at 402dp, the lowest in three years.

At £1.9billion, the com­pany is worth half its value in December when shares hit an all-time high of 828p. It now faces eviction from the FTSE 100 index.

The group, led by chief executive Iain Ferguson, stunned investors with its third profits warning this year and, in a gloomy trading update, said it viewed the short-term outlook with caution.

Bad weather and soaring international demand have pushed up the price of cereal crops, and Tate & Lyle said higher corn prices would hit profits hard at its Euro­pean ingredients division.

The division produces corn syrup for use as a sweetener by the drinks industry, and has seen raw material prices rise nearly 60 per cent in the past year.

In addition, Tate & Lyle’s US business has been hit by a row between the States and the European Union about genetically modified corn. US-produced animal feed made from corn gluten has been blocked by the EU, resulting in an oversupply in the States which has depressed prices there.

Although best known for its sugar, most of Tate & Lyle’s products are supplied to the international food and drinks industries and three-quarters of profits come from the US.

The weak dollar has depressed profits and the company expects the total impact of currency changes on half-year profits to be £12million.

The company also warned profits at its sugars division would be sharply lower but said profits from sucralose sweetener Splenda would be similar to last year.

Broker Panmure Gordon said the trading statement “has almost no redeeming features” while analysts at Charles Stanley said profits estimates for 2008 and 2009 would be downgraded.